At midday on New Year's Day the forecourt of the Melbourne Museum is almost deserted. Two boys jump skateboards off empty rows of concrete seating. A trickle of museum goers - many pushing prams - join the ticket queue, outnumbered by the staff behind the counter.

This is not a promising start to 2003 for the museum's new director, Patrick Greene. Last month he had to report a 19 per cent drop in official attendance for the 2002 financial year and a looming $2 million budget shortfall for this year. To balance the books, three senior executives were sacked and savings are being sought across the board.

But the real attendance trend is worse. The museum was open only to paying customers for eight months in its first year, 2001. Applying the 2001 attendance rate to a full year, the fall in 2002 approaches 50 per cent.

And it may get worse. This fall occurred before Federation Square opened, with its free, high-tech centre for the moving image and Australian art collection, and the relaunch this year of the revamped National Gallery of Victoria in St Kilda Road.

January is a key month for Greene as he attempts to turn around the visitor and budget slump. December is dominated by school exams and Christmas shopping. In February families will return to work and school after holidays. If the attendance fall-off continues through January there is little left of the financial year to avert another embarrassing drop in popularity and more budget cuts.");document.write("

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The museum is pinning its summer hopes on special exhibits including To Mars and Beyond, a display on space exploration; a collection of photographs by the journalist John Pilger; and paintings of extinct animals.

The good news for Greene is that customers leaving after a morning browse on Wednesday liked what they saw of the permanent collection and intended to return.

Richard Taylor and Philippa Eslake, who live nearby in North Carlton, were on their 10th visit with their two young children since paying $144 for a two-year museum membership last winter.

Taylor still does not like the architecture - "it's not quite as bad as Federation Square" - but the children's museum and the indoor forest are a hit with him and his two-year-old son.

An older couple, Beverley and Russell Appleton, from Kensington, roamed the exhibits for almost three hours. Mr Appleton enjoyed the display on Victoria's Aboriginal communities, the interactive mind and body section, and the exhibits of Melbourne life that featured streetscapes and schoolyard scenes he grew up with.

"It's a shame the attendance has fallen off," he said. "I don't think a lot of people realise how good and current it is." The Appletons, regular visitors to Canberra, note that the new National Museum of Australia has free general admission - in Melbourne it is $15 per adult - and more visible marketing of temporary exhibits that appeal to them, such as the political cartoon collection they saw in November.

Since the Melbourne Museum opened in the Carlton Gardens two years ago, there have been two main lines of criticism. First was the site itself; the location, critics said, was not central enough and the angular, modern design of the museum clashed with the 19th century Royal Exhibition building.

Next came the accusation that the high-tech, pop culture, and social commentary elements of the exhibits amounted to little more than a middle brow theme park. But the real challenge for Greene, who took up his post in August, is that the problems facing the museum run much deeper than a need for sharper marketing or arguments about the style of the building and its exhibits.

As an experienced interstate museum administrator puts it: "The museum, which is out of town, on a scale that is expensive to run and charges for entry, will be competing with new cultural buildings at Federation Square and the National Gallery of Victoria in the centre of town that are free. It's like a bantamweight fighting a heavyweight.

"People are not going to come back (to the museum) if the offering doesn't change. If they don't get the numbers through the door they can't afford to bring in the exhibits that will turn it around. It has structural problems of charges, location and running costs that need to be addressed by the new director or it will face a spiral of problems into the future."

Greene says he is confident the museum will meet its attendance projection for this financial year of 657,000 visitors.

He believes the original attendance estimates of millions of visitors a year were unrealistic. A drop from first year figures, which were boosted by the novelty factor, was expected and the museum was not alone in suffering from the pool of international visitors drying up after the September 11 attacks in the United States.

This week Greene would not outline specific initiatives to attract visitors, but said a significant addition to the display of flora and fauna would be announced soon. He ruled out a ticket price cut. The Mars exhibition, expected to attract 80,000 viewers, was "performing well", he said.

The recent round of cost cutting spared the museum's research program, and Greene said he "did not anticipate any major changes" in research.

A museum insider, who would not be named, said the lack of space for Victorian flora and fauna and the relatively low popularity of some technology displays were the main problems in terms of exhibits.

"The Aboriginal gallery, the story of Melbourne and the mind and body section have all been very popular," he said. "The natural sciences are also enormously popular but there is not enough space for the flora and fauna of Victoria."

Ian Galloway, who developed the exhibition program and was acting chief executive the year before the museum opened, said with hindsight he would have made one major change.

"I opposed the inclusion of the science arcade and the digital technology exhibition," he said in a speech last year.

"The logical venue for these exhibitions was Scienceworks. Incorporating these themes at Melbourne Museum undermined the product at Scienceworks and confused its position."

Despite this, Scienceworks, located at Spotswood, defied expectations last year by posting a healthy increase in paying visitors.

While advocates of the Melbourne Museum say that the success of the interactive Scienceworks displays supports the same approach being taken at Carlton, others believe there is confusion over where the Melbourne Museum sits in the cultural marketplace.

The Victorian Liberal Party spokesman on the arts, Andrew Olexander, said the museum had failed to differentiate itself from Scienceworks at one end of the spectrum and art galleries at the other. "The facilities and the exhibits are world class," he said. "But it needs a lot better target marketing. People in the regions don't know what's on offer.

"The museum hasn't delineated in the minds of visitors a specific reason to attend." He said the museum had also not established sufficient networks with tourism operators to make the museum a "must see" on tourists' itineraries.

The Minister for the Arts, Mary Delahunty, needed to appoint a marketing steering committee backed with a significant budget to fix the problem, he said.

Greene said the museum worked closely with Tourism Victoria and the Australian Tourism Commission, attracting 34 per cent of its patronage from tourists - 18 per cent from overseas, 14 per cent from interstate.

Last financial year the museum won marketing and public relations awards including the Australian Tourism Award, the Victorian Tourism Award and Australian Marketing Institute award for excellence. The National Museum of Australia, which opened in Canberra five months after the Melbourne Museum, makes an interesting comparison.

It also attracted controversy over the modern style of its building and exhibits, but in most other respects Canberra's approach was the complete opposite of Melbourne's. Entry to the permanent collections is free. The museum budgeted for 500,000 visitors a year, but had one million in the first 12 months. However, sponsorship and other commercial revenue was harder to find and the museum recorded a deficit of $3.7 million last financial year.

This week a National Museum spokesman said attendance levels were running about 25 per cent below those of a year ago.

The higher than expected attendances overall in Canberra, and the extra running costs that came with them, allowed the museum to gain an extra $9 million a year in government funding. This, coincidentally, is almost exactly the amount the former director of the Melbourne Museum, George MacDonald, said he wanted in extra government funds when the Carlton campus opened.

One former museum official said this was still the level of extra funding required to ensure the museum's research and collection functions could continue without the threat of cuts because income from attendance and sponsorship fell short.

In its last budget, the State Government announced an extra $17.2 million in museum funding over the next four years.

A former museum administrator, who declined to be named, said the financing of the Melbourne Museum needed to be reconsidered not only as a matter of economics.

"Melbourne needs to ask what we want as part of a civilised society," he said. "People expect to pay for something like Scienceworks but not for a general museum. If a free museum is part of a civilised society, how much are we prepared to pay? If it can't be paid for on a user pays basis today, how is that going to affect future generations?"

He said the museum was not on a level playing field with other attractions, such as the National Gallery of Victoria, because it had to charge for general admission. It was easier and cheaper for art galleries to stage touring blockbuster exhibitions than for museums.

Greene, who came from England, where the Blair Government is removing museum entry fees, said the Victorian Government provided "a good level" of financial support.

In London this week, The Guardian reported attendance increases of between 83 per cent and 111 per cent for the Science, Natural History and Victoria and Albert museums in London after a year of free entry.

Greene agreed free entry would set the turnstiles clicking at Carlton, but he did not believe the extra parking, food and merchandise revenue would cover the lost income.